Brighter Days Ahead for U.S. Manufacturing?

U.S. industrial manufacturers are optimistic about their own prospects for 2017, according to PwC’s fourth-quarter Manufacturing Barometer. But their outlook for others remains dampened in comparison.

A significant majority of PwC manufacturing panelists (78 percent) noted that they believe the U.S. economy began to show “sharp upward growth in the fourth quarter of 2016,” the report notes. But only 13 percent could say the same for the global economy – down from 20 percent two quarters ago. That despite the fact that 67 percent reporting their own international sales were the same or up during the quarter.

Most panelists (85 percent) also forecasted positive revenue growth in the year ahead, with average own-company growth expected to be around 4.6 percent in 2017. Only 2 percent expect negative growth, and 2 percent expect sales to be flat. But still 11 percent declined to report because of continued uncertainty in “this fast-changing U.S. economic environment.”

The challenge for many manufacturers over the last few years is that the industrial sector has seen slower growth than many other sectors. Industrial production in the U.S., for example, has been relatively flat for most of 2016, according to the Federal Reserve. And manufacturing facilities have room to ramp up, operating at an average of around 75 percent capacity (5 percentage points below the long-term average).

But as sentiment changes, these figures may change, as well. Lack of investment (business and residential) has been a key drag on economic growth in 2016, according to the Federal Reserve. With more optimism, will companies be more willing to expand investment?

And manufacturing employment edged up in December, though it still remains below its January 2016 peak. There’s still some hesitation to hire, according to the PwC report, but 35 percent of panelists said they expect to add employees in the next 12 months. However, according to respondents to the latest MDM Industry Outlook survey, finding skilled talent also remains a struggle.

Many companies are still looking for the plug-and-play employee who can do everything as soon as they start, but that might not be the best approach for long-term success. Investment in building an onboarding and ongoing training program can help develop the needed skills with new employees – and to keep them growing with your company.